A living wage

Well, you wouldn't start from here would you. What a bizarre place the modern UK has become. Gordon Brown's huge extension of tax credits and the general extension of welfare benefits has led to a large percentage of wages effectively being subsidised by the State. The damage that this has done cannot be under-estimated. Brown was a brilliant marxist economist, he knew full well what he was doing. Now so many people are dependent on state hand-outs that any threat to take them away can result in protest groups like UK Uncut being formed.

Ed Milliband's weekend whimsy has been to suggest that companies pay the living wage rather than the minimum wage. the difference is quite a lot, but far less then people imagine when taxes are taken into consideration - almost half the increase would go in NI and income tax anyway, plus benefits would be reduced for the higher income - leaving receivers of ed Milliband's promise probably no better off. The companies too would benefit for one year, so hardly and incentive to change or much of a reward for doing so. all this smoke and mirrors avoids the key question in any event, why are wages so low?

Well, firstly, free movement or labour has not helped the lowest paid as they face the heaviest competition for work from unskilled immigrants. Secondly, with input costs rising as the Pound has de-valued 25% since the recession, businesses have had to cope with increase costs, with prices hard to rise in a deep recession, wages took the brunt of the crunch. Thirdly, there are taxes, it is very expensive to employ people, less so at the bottom, but still expensive. This is why firms have moved to zero hours contracts and other ways of trying to avoid full-time recruitment, because the costs are prohibitive. Fourthly and finally, taxes are too high, this is related to the third point for employer taxes but also applies to the employees, too much of their wages go on taxes on council tax, fuel duty, VAT at 20% and so on - even though income taxes are low and nearly non-existent for low income households, other taxes are high, reducing their disposable income to be spent on real goods and services.

What is interesting is that Labour are sort of trying to come up with a partial solution to point three, but ignoring the other three. Current politics has become a game of band aid policies, with seemingly little attempt to alter under-lying dynamics. Above I have laid out the obvious, immediately changeable issues, with even mentioning the standard or schooling or the type of jobs being generated by the economy, both of which are harder for a 5 year Government to do too much about.

On Marginal Tax Rates

Apologies for a very pedantic piece on a Monday morning, but someone has to raise it. Today is the first day of the next tax year and so there is some play in the media about the various tax effects of the budget and previous budget as to what all of those who may be due pay some tax may experience in their wage packets.

Much of the discussion, as one would expect, is around who wins and who loses and indeed who got the worst deal and who the best.

(Incidentally, I watched a very dispiriting programme at 10am on the BBC yesterday in which an entire army of lefties insisted we should simply redistribute all wealth communist style as all 'earned' wealth had been stolen - the couple of game sane people in the room Nicki Campbell allowed to be shouted down at all times. Owne Jones is getting far too much airtime for his raving communist schtick).

Anyhow, apart from my whimsy, I am puzzled by the way in which certain tax cuts and such are discussed. For example, the lowering of the 40p tax band is rigthly described as a rise, whilst the increase in the tax free allowance is a cut. This much I can follow.

But Grant Thornton have been peddling some PR line about the terrible effects of marginal rates on tax on the poor. It describes that due to reductions in tax credits and other beenfits, people will suffers 73% rates of tax on their earnings.

My point is that this just is not the case. In the example of people earning say £42,000, they now have to pay more tax over to the taxman. For someone earning £15,000, they don't pay anymore more tax. What happens to them is that their welfare gift from the State is reduced as they earn more. They don't pay more over, they just receive less unearned income from taxpayers. I agree that the net effect feels the same and will be disincentive to work harder for limited rewards - but it is not a marginal tax rate. A tax rate implies that earning more will cost you more in tax. This is not the case with low earners. They don't pay more tax as a result of the reforms, indeed low earners are the recipients under this Government of a hug tax break as the personal limit has been upped considerably in 3 years. What they are feeling now is the attempt to reduce susbisdy for their wages as they earn more.

This grates becuase it misses a fundamental point over who is really paying tax and who is not. In this sense it is directly related to the ridiculous concept of a bedroom tax, which is another conflation led by the left of a welfare reduction being described as a tax when it is no such thing.

The points may seem pedantic etimology; yet their effect is high, they lead people to think the Government is raising taxes on them when it is doing no such thing. If all cuts to any welfare budgets or spending get described in future as tax rises then we have truly entered a parallel, and confused, world.

There was a young woman, who lived in a shoe...

We don't normally tread on Daily Mail demonisation of the Chavs territory on this blog. But today the story of Heather Frost, 37 year old  mother of eleven, who is moving soon into a brand new, taxpayer funded purpose built house for her and her off spring, caught my eye.

And already its dog whistle time. The Daily Mail presses those middle class buttons so well. 'The purpose built house'. Well, all social housing is purpose built. Just not normally for eleven kids. 

Her TWO current council houses are too cramped ! - well, they would be. Thirteen or fourteen people living in them. That's at least two to each bedroom. And having to serve meals in a kitchen made for 3-5 people. 

And the pictures of her rubbish strewn, neglected,  back garden don't actually specify that it is her garden. Just 'the properties' in that street. And even if it is her garden, from the front there are skips and it looks like some sort of clearout going on.

The images have set off the comments. Some 3000 comments just today, on the Mail Online, world's most popular media website.  {That is actually an incredible statistic when you think about it. More people read the Daily Mail webpages, than read the BBC News, which is put together with a giant slice of Beeb funding. Some £120 million. Some of the comments on the mail online have been 'approved/disapproved by up to another 8-9,000 readers. Astonishing.}

As is to be expected most can't believe that this family of non workers, never workers, has been given a brand new house to live in. A nice house, not the usual council seconds.  Many can't believe that the father's are nowhere to be seen. Others that the council has gone mad building a new house.  

And I have to say I agree.

Not with the attacks on the council, who have no choice. They have, by statute, to adequately house their tenants. Nor with the attacks on the mother, who having been a fourteen year old pregmum, has no hope of having a good job, and has been bringing up a football team sized brood ever since anyway. Nor with the large number of comments complaining about having to pay a large mortgage while Mrs F pays about nothing. Your own mortgage has nothing to do with the government. You choose what you can afford. And the comment making the headlines, that 'she will inspect the new house to see if she's satisfied with it, or she won't move in' sounds suspiciously like an out of context remark.

What is making me angry..no more than angry..furious, is that this situation has been allowed to happen in the first place. 

I am stunned that over the last fifteen years no one has explained to the mother that people have responsibilities, and she has to  live within her means. If she wants to have eleven kids or eleven hundred its up to her. But the state should not be the provider.  If she had a child at fourteen and wanted to be a mum, well..that's her life choice. 

But it should have been made very clear that the maximum benefits allowable are 'X, irrespective of the number of dependents and that if the family was unable to cope, children would be taken into care.. That the maximum sized house is x bedrooms and that she must be aware that its necessary to live within those rooms, or rent / buy her own place.

That rents may rise and that energy bills, food bills, clothing costs may too. That benefits may rise or may not. That her tenancy will be a five year renewable agreement, subject to revision, and not for life. That anti social behaviour would not be tolerated. That the children are expected to attend school each school day and are suitably clothed and fed.

That unemployment benefits are paid on a decreasing scale and in order to receive them, after x months/years, voluntary work will be required to be undertaken, if no suitable jobs exist.

In short.. she should have been told that she was damn lucky to have got one of the limited stock of social housing in the first place, that the state spends more money than it actually has,  so don't take the proverbial.

I'm not claiming that Mrs Frost's children ARE ASBO street kids and she is a feckless parent. They might be model pupil, high achievers for all I know. What I am suggesting is that future households planning to have 10 kids will be aware that their are limits to welfare and that benefits to suit circumstances are not an automatic right.  The minimum 1 bed flat on the top floor of a tower block is a right. Everything else must be earned, and may be withdrawn.

 There aren't many people in Mrs Frost's situation. But there are some 40,000 families, out of work with 5 or more children.  And it had been on the rise since 2008, because benefits were not capped.  How many are long term and how many recent recession victims isn't known. But surely even 1,000 families of 5 children, where no family member has EVER worked, is 1,000 too many.

Ian Duncan Smith's reforms are attempting to prevent these extreme cases occurring.   The nasty party wants to impoverish the poorest and most dependent in society. They have been widely condemned by many as Victorian era poor laws.

But they aren't . They are trying to bring some sanity back to a system that has gone absurdly wrong.